UPDATE: Modelling the interaction between the NEG and State RETs

While initial modelling of the NEG has been undertaken for the Energy Security Board, to date, analysis is yet to fully consider the interaction between the proposed policy and state renewable energy targets (S-RETs), with earlier modelling assuming that targets in  Queensland and Victoria would not incentivise any further renewable investment beyond auctions that have already taken place.

In doing so, initial modelling is likely to have understated renewable energy investment under current policy, referred to by the ESB as a ‘do nothing scenario’, prior to the implementation of the NEG.

In this update, we present modelling of the NEM under a ‘current national policy’ projection – including state renewable energy targets – for the purpose of providing a more complete view of the shape of the market without the implementation of the NEG.

When the impact of the QRET and VRET schemes are considered, modelling indicates that around 8 GW of new renewable capacity is expected to enter the market to 2030. Renewable energy investment, and electricity sector emissions reductions, are therefore likely to be far more advanced without the NEG than earlier analysis assumes.

When expected investment at the state-level is considered, modelling indicates that the government’s proposed emissions target for the electricity sector will be exceeded under ‘do nothing’ scenario – without the NEG – changing the baseline for the measurement of the impact of the scheme, and COAG’s consideration of how the framework interacts with existing state policy.

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